Housing court referee orders repairs of Frenz properties, but opens door to possible evictions

A Hennepin County housing court referee ordered Friday that necessary repairs must proceed in buildings owned by a pair of embattled Minneapolis landlords, but left the door open for eviction actions to proceed against remaining tenants.

Referee Mark Labine's order on Friday expanded on a ruling earlier this month that spelled out the powers of a temporary administrator for five apartment buildings in south Minneapolis owned by Stephen Frenz and Spiros Zorbalas, who were stripped of their rental licenses by the city and are not allowed to collect rent, although tenants still live in the buildings. Labine ordered the administrator to collect rent and oversee repairs needed to provide for the health and safety of tenants. The administrator must also testify on behalf of Equity Residential Holdings, the landlords' company, to evict those who don't pay rent.

Labine said the buildings, on the 3100 block of 22nd Avenue S., must be vacated or sold. If they are vacated, the city must assist in finding new housing for the tenants.

Of the 69 units in five buildings, 38 are occupied. With the help of a land bank, the tenants, most of whom are Hispanic and low income, hope to stay in the buildings by buying the properties from Frenz and converting the buildings into cooperatives. The land bank has offered Frenz more than $5 million, but he reportedly is seeking $7 million. In the hearing Thursday, Frenz's attorneys, Douglass Turner and Chris Kalla, made it clear they wanted to evict the tenants — a process handled in a separate court.

Michael Cockson, a pro bono attorney representing the tenants, said he is "grateful that these tenants will finally be able to live in a healthy and safe environment."

"We hope that Equity Residential engages in negotiations in good faith for a possible sale," he said.

The decision followed a contentious hearing on Thursday where attorneys for the landlords and tenants sharply criticized each other.

Some 75 tenants and supporters jammed into a courtroom. While the crowd was quiet in the courtroom, Kalla complained that they were raucous in the corridor and asked Labine to bar them from the courtroom. "We are a public institution," said Labine, who declined to do so.

City Attorney Susan Segal said she was pleased that immediate repairs must be made under an administrator's watch, providing time for a transition. "The city would like to see the buildings sold to a responsible landlord who could keep the units affordable for the tenants," she said.

Shortly after Labine agreed July 10 to install an administrator, Frenz sent in workers to renovate the empty apartments over the objection of the administrator. Kalla told Labine the landlords had a right to turn the apartments into condos if they wanted to.

In a memo to Labine, the administrator Alex J. Dybsky, wrote that during the renovations a city inspector found gas stoves that were disconnected in vacant units of a building and gas lines that were uncapped. He cited a fire inspector who said permits and licensed contractors were required for kitchen and bath remodeling, new flooring and replacing windows and doors.

Labine ruled that Frenz and Zorbalas "have the right to rehab and make improvements to those units that are vacant in order to get the properties ready for sale, provided they apply for permits required by the city and comply with all city ordinances." Renovations must not "jeopardize the safety and security of the tenants currently residing" in the units, he wrote.

The city said it would like to help tenants stay in the buildings. The landlords' attorneys criticized the city for not forcing the tenants out. Labine acknowledged that, highlighting an ordinance that says when a license is denied or revoked, the city must order dwelling units vacated.

The five buildings are all that remain of Frenz's portfolio of 60-plus buildings after his rental licenses were revoked in 2017 for his secret partnership with Zorbalas, who also had his rental licenses revoked.

Labine ordered repairs made, paid for out of rent and a fund the city maintains which can then be recovered after the sale of the properties.

Randy Furst • 612-673-4224